New Economics Papers
on Collective Decision-Making
Issue of 2005‒11‒09
three papers chosen by

  1. The Impact of Direct Democracy on Crime: Is the Median Voter Boundedly Rational? By Justina A.V. Fischer
  2. Elections and the public expenditure mix By Ana Barreira; Rui Nuno Baleiras
  3. Are Voters Rationally Ignorant? An Empirical Study for Portuguese Local Elections By José da Silva Costa; Ester Gomes Silva

  1. By: Justina A.V. Fischer
    Abstract: Direct democracy is believed to lead to an allocation of resources that is closer to the median voter's preferences. If, however, the median voter suffers from bounded rationality, the allocation of public goods actually achieved should be affected. Based on recent empirical findings by economic psychologists, optimism bias and availability heuristic are assumed to influence the median voter's preferences for public safety; particularly, (1) a preference for lower spending on crime prevention and (2) a preference for fighting property crime to fighting violent crime is hypothesized. In consequence, in more direct democratic systems, a re-allocation of scarce means in favor of property crimes should be observed. Estimation of a structural economic model of crime using Swiss cantonal crime rates from 1986 to 2001 corroborates these hypotheses.
    JEL: K42 D80 D70
    Date: 2005–07
  2. By: Ana Barreira; Rui Nuno Baleiras
    Abstract: The paper presents an intertemporal utility model that determines the effects of elections on the public expenditure composition. Conventional political budget cycle models describe incumbents as concerned only with the conditions that guarantee re-appointment. Aiming at achieving re-election, incumbents behave opportunistically in order to seduce voters about their political performance. The paper introduces another motivation for the manipulation of the public expenditure mix near elections: the incumbent’s concern with her future utility in the case of defeat. We provide data to suggest that both central and local governments in the European Union do manipulate the budget composition around election moments. In order to rationalise this observation, the paper proposes a model where voters and incumbent are rational, have complete information and no bias towards any category of public expenditure, namely consumption expenditure or investment expenditure. The paper shows that even under these extreme conditions, an electorally induced cycle on public expenditure mix is still expected, one where consumption expenditure raises relative to investment expenditure in pre-election periods. This opportunistic budget manipulation follows from two facts. First, any decision an incumbent makes on consumption expenditure pays back political dividends during the same period the expenditure is incurred, while any investment expenditure only becomes visible to voters with a one-period delay. Second, re-election is an uncertain event, which makes the second state of nature valuable. Outside politics, the incumbents’ pay back is a direct function of the voters’ assessment of the incumbents’ job while in office. The model is then extended to accommodate the scenario where voters and society at large do not share preferences. When voters or society evidence a preference prone to one of the public expenditure categories, a bias towards such category emerges in post-election periods. In pre-election periods two cases are found. Consumption expenditures exceed investment expenditures if either voters or society prefer the former category at the margin. The cycle’s nature is ambiguous if the marginal preferences of voters or society are biased towards investment expenditures. JEL classification: H50, E62. Keywords: Political Budget Cycles, Public Expenditure, Elections.
    Date: 2004–08
  3. By: José da Silva Costa; Ester Gomes Silva
    Abstract: The application of the rational choice postulate to a political context invariably leads to the conclusion that most voters are ill informed when making the decision for whom to vote. In this paper, the authors do an empirical evaluation of the rational ignorance theory, based on the results of the 1997 Portuguese Local Elections. The results only partially sustain the hypothesis of rational ignorance, although it is also possible to identify several limitations that prevent the establishment of definite conclusions in this specific field.JEL Classification: H7 Key words: Voter’s Behaviour; Local Elections; Local Governments; Portugal.
    Date: 2004–08

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.